Cambridge University Press 978-1-108-47085-8 — Macroeconomics for Business Lawrence S. Davidson , Andreas Hauskrecht , Jürgen von Hagen Frontmatter More Information Macroeconomics for Business Interpreting and applying macroeconomic analysis to the global economic environment and understanding the tools used to do so is fundamental to making good managerial decisions. Presuming no background in economic theory and prioritizing international application, this textbook introduces macroeconomics to business students. It explains how to understand domestic and global macroeconomic developments, policies, and data, and makes extensive use of case studies and data sets to present modern macroeconomics in a globalized world. Each chapter has several specific data exercises and practices as well as an international application focusing on the global perspective. By providing a host of international material, this book is useful for instructors and students around the globe. Lawrence S. Davidson is Professor Emeritus of Business Economics and Public Policy at the Kelley School of Business, Indiana University, Bloomington, with a PhD in economics from the University of North Carolina. He was the Founding Director of the Indiana Center for Global Business and the Global Business Information Network and received the John Ryan Award for Distinguished Contributions to International Programs and Studies at Indiana University. He was the Founding Director of the Kelley Center for the Business of Life Sciences and W. Michael and William D. Wells Life Sciences Faculty Fellow. Davidson worked as a visiting professor in Finland, Germany, the Netherlands, and South Korea. Andreas Hauskrecht is Clinical Professor of Business Economics and Public Policy at the Kelley School of Business, Indiana University, in Bloomington, with a PhD in economics from the Free University of Berlin. He has published two monographs and more than forty papers in journals and books. He has taught courses at universities in the US, Germany, Bulgaria, Bolivia, Ecuador, Croatia, Thailand, Vietnam, and Lao, and served as adviser to governments and central banks in Europe, Latin America, and Asia. He has worked as policy adviser for the Vietnamese government for more than two decades. © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-47085-8 — Macroeconomics for Business Lawrence S. Davidson , Andreas Hauskrecht , Jürgen von Hagen Frontmatter More Information Jürgen von Hagen is Professor of Economics, University of Bonn, Germany, and Visiting Professor, Department of Business Economics and Public Policy, the Kelley School of Business, Indiana University, with a PhD from University of Bonn and teaches MBA macroeconomics at Indiana University. He taught economics at Indiana University, the University of Mannheim, and the University of Bonn. Von Hagen has worked for the Federal Reserve Bank of St. Louis and the European Central Bank and has been a consultant to the IMF, the World Bank, the Inter-American Development Bank, the European Commission, the Federal Reserve Board of Governors, the Deutsche Bundesbank, the Bank of Japan, and governments in Europe and beyond. Von Hagen's publications include over ninety articles in refereed professional journals and over forty monographs. © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-47085-8 — Macroeconomics for Business Lawrence S. Davidson , Andreas Hauskrecht , Jürgen von Hagen Frontmatter More Information Macroeconomics for Business The Manager’s Way of Understanding the Global Economy Lawrence S. Davidson Indiana University Andreas Hauskrecht Indiana University Jürgen von Hagen University of Bonn and Indiana University © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-47085-8 — Macroeconomics for Business Lawrence S. Davidson , Andreas Hauskrecht , Jürgen von Hagen Frontmatter More Information University Printing House, Cambridge CB2 8BS, United Kingdom One Liberty Plaza, 20th Floor, New York, NY 10006, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia 314–321, 3rd Floor, Plot 3, Splendor Forum, Jasola District Centre, New Delhi – 110025, India 79 Anson Road, #06–04/06, Singapore 079906 Cambridge University Press is part of the University of Cambridge. It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781108470858 DOI: 10.1017/9781108557221 © Lawrence S. Davidson, Andreas Hauskrecht, and Jürgen von Hagen 2020 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2020 Printed in Singapore by Markono Print Media Pte Ltd A catalogue record for this publication is available from the British Library. Library of Congress Cataloging-in-Publication Data Names: Davidson, Lawrence S., author. | Hauskrecht, Andreas, Jürgen von Hagen, author. Title: Macroeconomics for business : the manager's way of understanding the global economy / Lawrence S. Davidson, Indiana University, Andreas Hauskrecht, Indiana University, Jürgen von Hagen, University of Bonn and Indiana University. Description: First Edition. | New York : 2019. | Summary: “This book was developed as a text for business school courses in macroeconomics. It has been used in the Core MBA and Kelley Direct Programs at the Indiana University Kelley School of Business, the German International Graduate School of Management and Administration in Hanover, the German Graduate School for Law and Management in Heilbronn, Germany, the Helsinki School of Economics, and the Sungkyunkwan University MBA Program in Seoul, Korea. This book is a different kind of macroeconomics textbook. Because it was written for business students specifically, it focuses on their needs to interpret and apply macroeconomic analysis and tools. It uses very little mathematics and it shuns the model-building general equilibrium approach taken in most textbooks. Rather, the book is organized around topics - those topics that are written about daily in the business press like inflation, government deficits, international trade imbalances, exchange rates, and more”–Provided by publisher. Identifiers: LCCN 2019021299 | ISBN 9781108456753 (paperback) | ISBN 9781108470858 (hardback) Subjects: LCSH: Macroeconomics. Classification: LCC HB172.5 .D3778 2019 | DDC 339–dc23 LC record available at https://lccn.loc.gov/2019021299 ISBN 978–1-108–47085-8 Hardback ISBN 978–1-108–45675-3 Paperback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-47085-8 — Macroeconomics for Business Lawrence S. Davidson , Andreas Hauskrecht , Jürgen von Hagen Frontmatter More Information Brief Contents Contents page vii List of Figures xii List of Tables xv List of Boxes xvii A Note to the Reader xviii 1 Macroeconomic Concepts and Indicators 1 2 Aggregate Demand 53 3 Aggregate Supply and Short-Run Equilibrium 88 4 Monetary Policy and Aggregate Demand 128 5 Fiscal Policy and Aggregate Demand 155 6 Monetary and Fiscal Policy in the Long Run 180 7 Economic Growth 209 8 International Trade, Exchange Rates, and Capital Flows 241 9 Free Trade and Protectionism 277 Index 308 © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-47085-8 — Macroeconomics for Business Lawrence S. Davidson , Andreas Hauskrecht , Jürgen von Hagen Frontmatter More Information Contents List of Figures page xii List of Tables xv List of Boxes xvii A Note to the Reader xviii 1 Macroeconomic Concepts and Indicators 1 1.1 GDP: Aggregate Demand, Supply, and Income 3 1.1.1 The Economic Circuit 4 1.1.2 National Accounting 9 1.1.3 GDP as Aggregate Demand 16 1.1.4 GDP as Aggregate Supply 17 1.1.5 GDP as Aggregate Income 19 1.1.6 GDP and Gross National Income 19 1.1.7 From GNI to Personal Income 20 1.2 Real GDP 21 1.2.1 Separating Quantity from Price Changes 21 1.2.2 Working with Data 23 1.2.3 Potential Real GDP and the GDP Gap 25 1.3 Working with Data: GDP Statistics 26 1.4 Real GDP per Capita around the World 28 1.5 International Application: Millennium Goals and Better Life 33 1.6 Measuring the Price Level and Inflation 34 1.6.1 The GDP Implicit Price Deflator 34 1.6.2 Other Price Indexes 36 1.6.3 Working with Data: Price Indexes 38 1.6.4 International Application: Inflation 38 1.7 Employment, Unemployment, and Productivity 40 1.7.1 Employment and Unemployment 41 1.7.2 Working with Data: the Labor Market 45 1.7.3 International Application: European Unemployment Rates 48 1.7.4 Productivity 50 1.8 Summary 51 1.9 Review Questions 51 Notes 51 © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-47085-8 — Macroeconomics for Business Lawrence S. Davidson , Andreas Hauskrecht , Jürgen von Hagen Frontmatter More Information viii Contents 2 Aggregate Demand 53 2.1 Working with Data: AD Components 54 2.2 BEA Announcements 58 2.3 Causes of